Matthew Slaughter of Dartmouth highlights two major positive — yes, positive — effects of globalization on the U.S. auto industry.
For decades the competitive pressures of international trade and investment have forced the Big Three to innovate and boost productivity, starting with gains in fuel efficiency after Japanese car imports surged with the oil-price shocks of the 1970s. In 1998 GM averaged about 46 hours to produce a vehicle in North America. By 2005 that was down to just 35 hours.
And second, insourcing:
In 2005, foreign-headquartered multinationals in motor vehicles and parts employed 334,900 Americans — at an average annual compensation of $68,125, fully 34% above the private-sector average. Over the decades that the Big Three have struggled with their American operations, foreign auto companies have rapidly established and expanded U.S. production through foreign direct investment.
I see insourcing first hand in my homestate of Indiana, where Toyota has two major plants, Suburu has one, and Honda is now building a large plant that will come online in the next few years. As the domestic companies and suppliers have struggled throughout the Midwest, most severely in Michigan, which is suffering through a one-state recession, the “foreign” companies have filled much of the void. Even closer to home, I’ve got two Toyota’s in the garage — both, coincidentally, built in Indiana.